State National Bank's Transactions Exempt from OFAC SDN List Check and Liability

State National Bank's Transactions Exempt from OFAC SDN List Check and Liability

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Question

State National Bank is a $250 million community bank. It makes a variety of consumer and commercial loans, regularly transmits funds via wire transfers for its customers, and issues commercial and stand-by letters of credit. Which of the following transactions can State National make without checking the OFAC SDN list and without incurring liability?

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Explanations

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A. B. C. D.

D

The Office of Foreign Assets Control (OFAC) is a division of the US Department of the Treasury that administers and enforces economic and trade sanctions based on US foreign policy and national security goals. The Specially Designated Nationals (SDN) list is a list of individuals, organizations, and countries that have been sanctioned by OFAC, and US persons are prohibited from transacting with them without obtaining a license or other authorization from OFAC.

In this scenario, State National Bank is a community bank that makes various types of loans, transmits funds via wire transfers, and issues letters of credit. In order to comply with OFAC regulations, the bank must check the OFAC SDN list before engaging in any transactions involving the transfer of funds or the issuance of letters of credit to ensure that it is not transacting with a sanctioned entity.

Option A states that the bank can send a wire transfer via its correspondent bank in New York for a commercial customer. Since this transaction involves the transfer of funds, the bank must check the OFAC SDN list to ensure that the commercial customer and its corresponding bank are not on the list. Failure to do so may result in the bank violating OFAC regulations, which could lead to significant fines and penalties.

Option B states that the bank can sell a cashier's check payable to a third party. This transaction does not involve the transfer of funds outside the bank and therefore does not require the bank to check the OFAC SDN list. However, the bank must still comply with other regulatory requirements, such as the Bank Secrecy Act (BSA) and anti-money laundering (AML) regulations, to prevent financial crimes like money laundering and terrorist financing.

Option C states that the bank can cash an on-us check over-the-counter for a noncustomer. This transaction also does not involve the transfer of funds outside the bank and therefore does not require the bank to check the OFAC SDN list. However, the bank must still comply with BSA and AML regulations, which includes identifying and verifying the identity of the noncustomer before cashing the check.

Option D states that the bank can be liable for all transactions if it fails to comply with OFAC regulations. This option is correct because failure to comply with OFAC regulations can result in significant fines and penalties, as well as reputational damage. Therefore, it is important for State National Bank to implement appropriate policies and procedures to ensure compliance with OFAC regulations and other regulatory requirements.